The A-Z about Reverse Mortgage Loans:
The growing expenses of modern day prove to be a hassle for the everyman, but are especially difficult for the senior citizens who do not always have a steady source of income. Short of relying on their children and their savings to see to their expenses, senior citizens did not have many options in the past. However, with the advent of Reverse Mortgage Loans, they are now able to meet their needs without asking their children to provide for each and every expense which occurs.
Reverse Mortgage Loans are the opposite of traditional home loans. The individual opting for the loan will receive a regular stream of income against the mortgage of their house. The house should be in the name of the person requesting the loan and should be an owned property. The bank will then formulate an estimate for the property, taking into account various aspects such as condition of the home, the area it is situated etc. The borrowers will be allowed to stay in the property till the end of his life and receive periodic payment from the bank, after it has considered a margin for interest costs and price fluctuations, over a fixed loan tenure.
When the borrower dies, the next of kin are notified about the loan. They can choose to either pay the off the loan or give up the property. If they choose the latter, the bank then sells the property on the market to make good of the loan. Any extra amount obtained from the sale of the property is passed onto their legal heirs. If the sales proceeds are lower than the accrued amount, the bank bears the loss.
Borrowers can prepay the loan and retain their property if they so wish and they will be allowed to reside in the home even if they outlive the tenure of the home. Additionally, if one of the spouses dies before the tenure expires; the other can continue to reside in the home.
Reverse mortgage loans are a fairly new concept in India and many view it with resentment as it means giving up a family home. However, it is a very useful tool for senior citizens who are unable to meet their financial needs on their own.